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Environmental, Social and Governance Performance: Analysis of CEO Power and Corporate Risk

Author

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  • Yan Zhao

    (School of Management, Shandong University of Technology, Zibo 255000, China)

  • Ehsan Elahi

    (School of Economics, Shandong University of Technology (SDUT), Zibo 255049, China)

  • Zainab Khalid

    (School of Economics and Management, Southeast University, Nanjing 210009, China)

  • Xuegang Sun

    (School of Economics and Management, Hebei University of Technology, Tianjin 300130, China)

  • Fang Sun

    (School of Management, Shandong University of Technology, Zibo 255000, China)

Abstract

This study explores the relationship between a company’s Environmental, Social, and Governance (ESG) performance, and corporate risk. Moreover, the study emphasizes how CEO power moderates this relationship. Using a sample of Chinese A-share listed enterprises from 2011 to 2018, it is found that better ESG performance can reduce firms’ risk. The negative relationship between ESG performance and corporate is stronger for the company with greater CEO power. This link is weaker for state-owned firms and stronger for firms with lower institutional investor holdings. Furthermore, ESG performance mainly affects enterprise risk through three channels: firm reputation, information transparency, and internal control. Generally, firms with better ESG performance are more likely to have sound risk management frameworks. Our findings provide empirical evidence for implementing an ESG information disclosure system and promoting responsible investment in the capital market.

Suggested Citation

  • Yan Zhao & Ehsan Elahi & Zainab Khalid & Xuegang Sun & Fang Sun, 2023. "Environmental, Social and Governance Performance: Analysis of CEO Power and Corporate Risk," Sustainability, MDPI, vol. 15(2), pages 1-18, January.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:2:p:1471-:d:1033576
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    Cited by:

    1. Yuxin Ning & Yihan Zhang, 2023. "Does Digital Finance Improve Corporate ESG Performance? An Intermediary Role Based on Financing Constraints," Sustainability, MDPI, vol. 15(13), pages 1-17, July.
    2. Sanjukta Brahma & Fotini Economou, 2024. "CEO power and corporate strategies: a review of the literature," Review of Quantitative Finance and Accounting, Springer, vol. 62(3), pages 1069-1143, April.
    3. Lin, Ouwen & Guan, Jianbo, 2024. "The impact of media attention, board independence on CEO power, and ESG in state-owned enterprises," Finance Research Letters, Elsevier, vol. 62(PA).

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